FUTURES are simply Fixed Date Forwards

Forward and Futures Contracts are essentially the same, the differences being largely in conventions
regarding the quotation of prices. Since we are familiar with Forward Contracts, the similarities/ differences of the Futures contracts are set off against the features of Forward Contracts, as below:

In case of USD-INR, the Forward Rate is quoted as X INR per 1 USD. For example, the current Forward Rate for 31-Aug-08 is 42.3350 INR per USD 1.

Some clarity is needed on this, but our understanding, so far, is that for Dollar-Rupee futures, the Futures Rate will also be quoted in the same manner as the Forward Rate.

No margin requirement

Margin required

Avowedly non-speculative for Corporates in the Indian context, because trades (hedges) can be done only against and to the extent of actual exposures.

Fully speculative, because the contracts will be cash-settled on expiry. No delivery of Dollars can either be taken or given.

Account for, by far, the lion's share of the market volume. Estimates range from 80-95%.

Accounts for a small part of the total market volume, with estimates ranging from 5-20%.

Client (corporate) trades/ hedges with a bank.

Client will trade/ hedge with a broker who is a member of the exchange.

In the proposed Futures market, any resident Indian can buy/ sell Dollar-Rupee Futures (lot size USD 1000) upto a maximum of USD 5 million with a broker, at rates similar to the currently quoted
Forward Rates. The Contract may be squared off at or before maturity, the difference in rates being settled in cash.

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